Correlation Between Applied Materials and Balfour Beatty
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Balfour Beatty at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Applied Materials and Balfour Beatty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Balfour Beatty plc, you can compare the effects of market volatilities on Applied Materials and Balfour Beatty and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Applied Materials with a short position of Balfour Beatty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Balfour Beatty.
Diversification Opportunities for Applied Materials and Balfour Beatty
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Balfour is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Balfour Beatty plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty plc and Applied Materials is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Applied Materials are associated (or correlated) with Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty plc has no effect on the direction of Applied Materials i.e., Applied Materials and Balfour Beatty go up and down completely randomly.
Pair Corralation between Applied Materials and Balfour Beatty
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Balfour Beatty. In addition to that, Applied Materials is 2.28 times more volatile than Balfour Beatty plc. It trades about -0.16 of its total potential returns per unit of risk. Balfour Beatty plc is currently generating about 0.12 per unit of volatility. If you would invest 43,389 in Balfour Beatty plc on September 13, 2024 and sell it today you would earn a total of 2,811 from holding Balfour Beatty plc or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Balfour Beatty plc
Performance |
| Timeline |
| Applied Materials |
| Balfour Beatty plc |
Applied Materials and Balfour Beatty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Balfour Beatty
The main advantage of trading using opposite Applied Materials and Balfour Beatty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Balfour Beatty can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Balfour Beatty will offset losses from the drop in Balfour Beatty's long position.| Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Hyundai Motor | Applied Materials vs. Reliance Industries Ltd |
| Balfour Beatty vs. Silvercorp Metals | Balfour Beatty vs. Hochschild Mining plc | Balfour Beatty vs. United States Steel | Balfour Beatty vs. Ironveld Plc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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